Published: Thu, June 07, 2018
Money | By Ethel Goodwin

Tech stocks gain as U.S. confirms ZTE deal

Tech stocks gain as U.S. confirms ZTE deal

China-based ZTE has reportedly signed an agreement in principle that would lift a U.S. Commerce Department ban on the company which barred it from buying from U.S. suppliers.

The Commerce Department, which oversees sanctions enforcement, told Reuters on Tuesday that "no definitive agreement has been signed by both parties". ZTE declined to comment.

According to Reuters, the preliminary deal includes a $1 billion fine against ZTE plus $400 million in escrow for any future violations, sources said.

The sources requested anonymity because they were not authorized to publicly discuss the matter.

The Commerce Department plans to amend the agreement to count part of ZTE's previous fine from past year ($360 million) as part of the total penalties. The preliminary agreement was signed by ZTE over the weekend, but the Chinese company has yet to sign the amended settlement agreement. The resolution of the ZTE case may clear the way for the make progress in its high-stakes trade talks with China. It has enjoyed the backing of Chinese President Xi Jinping, who has been negotiating with Trump over a broader trade agreement. Further fees could be assessed for a grand total as much as $1.7 billion.

ZTE has promised to replace its board and executive team as part of the deal. But Reuters reports that ZTE and the USA government have signed a preliminary agreement that will lift the Denial Order.

Trump appeared to confirm that a deal had been reached in a tweet on May 25, but subsequent broader USA trade talks in Beijing on United States tariffs on aluminum and steel ended inconclusively with no mention of the ZTE matter. Smaller makers of optical components, including Oclaro and Acacia, rely more heavily on ZTE's business.

ZTE ceased major operations earlier this year because of the ban. The Chinese company said in June 2017 that it had fulfilled its promise, but later admitted in March 2018 that while it had fired the four senior employees, it had not disciplined or reduced bonuses for the 35 others.

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